Deciding to Exit After 2 Years of Ownership

Check out oberle-risk.com that's O B E R L E- risk.com link in the notes. So let's hear about the acquisition itself. You mentioned Sam and him helping you work through the LOI negotiation.

Sam's own partner features here. So tell us that story and what you would share. Yeah, I will say one of the key parts honestly too of the successful transaction.

So I give him a ton of credit in that regard. My first offer was one that I felt was fair. It was inclusive of working capital.

You know, fast forward through probably four rounds of negotiation, like working capital became the issue, like of us potentially getting the deal done. And so through conversations with Sam, and I was also trying to minimize some of the downside risk as well. So again, through those conversations with Sam, we structured a forgivable seller note.

I effectively offered full price. I offered them like their asking, but again through a pretty healthy seller note and structuring it in a forgivable fashion. Like that's how I kind of mentally bridge that, that gap, at least from a risk standpoint. And then can we hear more about the mechanics of that?

Maybe, maybe Jack, feel free. Or maybe Sam, since you probably teach this at boot, talk to us about how a forgivable seller note works, how it mitigates risk, and particularly in this deal, since we got an actual example we can use. Yeah, I'll do my best and say I obviously chime in here too, right.

But so of my total deal call or of my. Of the total purchase, purchase price, 20% was through a seller note.

And the way that we agreed to do to structure it was the first two years were a interest only, like no principal for the first two years. So that really helped with my initial cash flow for those first two years. We also structured it in a way where there was essentially a floor.

So we looked at the last year's revenue and said that if we don't hit that same revenue number, I didn't tie it to earnings or gross margin or anything like that. Like we tied it to revenue because we felt like that was fair, like that was within my control and I couldn't manipulate revenue. Right.

If we didn't hit that previous year's revenue kind of pre transaction, then that year's principal payment would essentially be declined by however much we didn't hit that number by. So we have a nice little table that's in our seller note and all the things, right. So in a bad year, right, Like I'm potentially not paying back that year's principal.

And it was over the course of seven years again, first two years being interest only, so no principal. So a five year amortization, it was whatever the prevailing interest rate was at the time, you know, very. A lot lower frankly than it is today.